What happens when a thriving on-demand marketplace operating in one country wants to expand into new international markets? It faces a whole host of challenges — many of which require new and perhaps unfamiliar solutions.
In the final installment of the Hyperwallet podcast series, Michael Ting, senior vice president of digital markets at Hyperwallet, weighed in on the importance of recognizing the difficulties that emerge when firms want to expand internationally.
Speaking with PYMNTS’ Karen Webster, Ting highlighted some of the barriers to growth and explained how removing those barriers is a key consideration when providing a great on-demand experience in new markets.
“I think that the biggest [impediment to] growth for these on-demand companies is the belief that they can just reuse the same playbook over and over again,” said Ting. “When they’re just getting started, most of these firms are launching a sort of MVP version of their product to get to a critical mass of users very quickly with the least amount of friction. They typically try to do that in a market that is familiar to them … and they try to reuse that [strategy] over and over again.”
Bringing products to market can be impeded by short-term hurdles, noted Webster. Ting concurred, explaining that what firms “need to be thinking about is, number one, are buyers and sellers on both sides of the marketplace understanding what the value proposition is? Do they understand what is different from the status quo?”
According to Ting, taking a closer look at some of the biggest on-demand companies out there yields some clues. “They are providing services to industries that have been around for a very long time,” often in fragmented arenas, and the suppliers and consumers across all sides of the platform have knowledge of and appreciate the value that working within the marketplace brings.
For on-demand marketplaces, long-term objectives often include expanding into other global markets. As Ting explained, geographic expansion can give way to other types of expansion — such as into new demographics — and can help companies “expand into new markets and attract a whole new profile that is different” than those in the original market. Hyperwallet, for example, tends to see marketplaces start up in regions where the population is heavily banked. Moving into new markets, Ting argued, can bring the firm into areas that are relatively unbanked, presenting the unfamiliar challenge of paying a workforce without access to traditional financial services. Marketplaces, said Ting, must then determine whether the platform’s payment capabilities are sufficient or if new functionality must be layered on. “You need to think about how commerce works in nontraditional markets,” Ting explained. But in providing a local payout solution, marketplaces need to consider whether they’ll be required to enter into partnerships in those regions.
Localizing services represents the biggest challenge and barrier to growth in a new market for on-demand marketplaces, said Ting. “When it comes to these services … in order to pay suppliers in a local market, those marketplaces have to open a local bank account. That means they have to be properly licensed in that country.” Such localization, then, carries with it regulatory- and compliance-related considerations and costs that are, in Ting’s words, “not trivial.”
Still, Ting asserted that the ability to pay locally is a valuable way to stand out from the competition and help spur growth. “We think of payments as an integral part of the product offered by an on-demand marketplace,” he added. For freelancers, the overarching reason to join an on-demand marketplace in the first place is to make money. To these workers, said Ting, “the pinnacle of the user experience is getting paid. They are constantly looking at that platform in order to ensure that they are getting paid … consistently, reliably and cost-effectively.” Marketplace platforms, Ting advised, “have to be in control of that event. They cannot push control of that to a third party.”